CardX, a credit card service provider under SCB X Group, expects that some customers may fail to comply with the Bank of Thailand’s regulation on minimum credit card payments scheduled for next year.
At present, the central bank allows credit cardholders to repay debt at a minimum rate of 5% of the total credit balance per month under its debt assistance measures to help consumers cope with the economic impact of the pandemic. The rate is scheduled to rise to 8% in 2024, before returning to the regular rate of 10% in 2025, said CardX’s chief executive Sarut Ruttanaporn.
The company has 2 million credit cardholders in total, of which 160,000 accounts, or 8%, repay debt at the minimum rate of 5%. Even though the increase of the minimum payment rate to 8% next year may seem to be a fairly insignificant adjustment, some customers would not be able to afford such an increase. As a result, the company has told its customers to prepare for the move.
“Some clients are unable to pay at the normal rate, so the company would help support them on debt restructuring. However, we do acknowledge that some clients who show weak debt repayment ability could be classified as non-performing loans [NPLs] and the company needs to continue to manage the bad debt,” Mr Sarut said.
He said the central bank has set a specific timeline for the increase in its minimum payment rate for credit cards. However, the regulator has still not announced the ceiling interest rate for the loan product. Amid the pandemic, the Bank of Thailand reduced the maximum rate charged for credit cards from 18% per year to 16% at present. As a result, the income margin for the business has narrowed.
In addition, Mr Sarut said the company would collaborate with the central bank to come up with a solution to solve the country’s swelling household debt, including persistent debt (PD) of personal loan products. The company is ready to cut interest rates for clients applying for the loan assistance programme. However, the company’s proportion of PD under the central bank’s definition is less than 5% of the total personal loan customer portfolio.
According to the central bank’s PD definition for revolving personal loans, PD borrowers are those who are indebted consecutively for three years, while severe PD borrowers are indebted consecutively for five years with a minimum monthly income of 20,000 baht at banks and 10,000 baht at non-banks.
CardX is transitioning its credit card and personal loan portfolio from Siam Commercial Bank to the new entity under SCB X Group, and the transition is expected to be completed next year. With the new digital infrastructure-based organisation, CardX expects to book positive earnings by 2025, Mr Sarut said.